After A Brutal Week For News Organizations, What’s Next?

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This week has delivered a multitude of brutal news on all business fronts. The most acutely felt pain for most people is losing their job, and as we reported at The Business Sheet there have been 12, 625+ firings announced this week alone. Today, American Express said it intends to let 7,000 people go, Motorola said it’d cut 3,000 and Portfolio is firing a handful of people as well.

While the jobs at places like American Express are being trimmed in order to limit costs during a recessionary period, odds are they will return in some form when the economy rights itself. However, the jobs at places like Portfolio, Time Inc. and the L.A. Times may never return. As Janet Robinson, The New York Times CEO, implied last week, the newspaper business faces secular, not cyclical problems. In other words, problems that won’t go away even when the economy rights itself.

If that is the case, and the newspaper business (as well as the magazine business) is being shredded, the question becomes, what happens next?

Yesterday David Carr summed up the recent bad news:

It’s been an especially rotten few days for people who type on deadline. On Tuesday, The Christian Science Monitor announced that, after a century, it would cease publishing a weekday paper. Time Inc., the Olympian home of Time magazine, Fortune, People and Sports Illustrated, announced that it was cutting 600 jobs and reorganizing its staff. And Gannett, the largest newspaper publisher in the country, compounded the grimness by announcing it was laying off 10 percent of its work force — up to 3,000 people.

Clearly, the sky is falling. The question now is how many people will be left to cover it.

It goes on. The day before, the Tribune Company had declared that it would reduce the newsroom of The Los Angeles Times by 75 more people, leaving it approximately half the size it was just seven years ago.

The Star-Ledger of Newark, the 15th-largest paper in the country, which was threatened with closing, will apparently survive, but only after it was announced that the editorial staff would be reduced by 40 percent.

And two weeks ago, TV Guide, one of the famous brand names in magazines, was sold for one dollar, less than the price of a single copy.

He then states that these various news organizations have plenty of readers, they just lack cash to fund their operations. In essence he says what many have said: The business model is broken, because web operations make 1/10 the money that print operations earn. He goes onto to lament the possibility that the quality of news will fall as the amount of reporters shrinks.

The death of the newspaper and the strangling of the magazine have dire implications to be sure, but if a new era of news production is ushered in following the economic shake out we are experiencing, it doesn’t have to be as doom and gloom as many are expecting.

If news organizations can create a hybrid model that incorporates the best elements of blogging with the best elements of traditional news operations than I do not believe we necessarily will see a decline in the quality of journalism. Carr’s simple arguement that fewer people covering the news means fewer revelations about the news is completely logical. Yet it isn’t necessarily true.

Take for instance the news today that Portfolio was cutting back on production and staff. The initial information was reported by The New York Observer, then I saw MediaMemo pick it up, then The New York Times, then Silicon Alley Insider. Shortly after the initial reports, MediaMemo added some more information. That’s four companies all chasing the same story.

Is there any reason for me to chase after that story? No. I felt the reporting in each instance was adequate and I summarized it and put it on this blog. Had I thought they left something out, I could have dug in a little deeper. I could either report more information about the ad market tanking, or if I thought there was something more sinister at play, I could keep digging into the story trying to find out what was really happening. Let’s say I found something interesting which was unnoticed by those other folk. As soon as I reported it, they link to it and the news would be disseminated.

Reporting on Portfolio is not the most important news in the world. I doubt my mother would care. However this model can–and likely, must–work for more stories in the future. While the ad money is decreasing for news companies, it is not completely disappearing completely. There will still be enough money to support companies that want to dig a little deeper. There will still be enough money to support important reporting.

Hopefully in the future quality reporting won’t die as Carr fears, rather crap reporting will die. Instead of rewriting press releases and reporting on insignificant product launches, reporters will be given space to report on bigger issues. The smaller news that springs up along the way can be aggregated from other reporters work, much like blogs do today. This will free up reporters to chase bigger, better stories. And in turn, the quality of journalism does not have to decline.

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Online Behavior Rapidly Changing In Video

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Hulu is now the sixth most popular site for videos on the web serving 142 million streams for September to 6.3 million people. Considering it only launched in March, that is a rather impressive feat. Two other impressive feats for Hulu:

1. It can make money. Few web video sites have figured this out. In July, Alley Insider estimated it would earn $12.5-$25 million in net revenue for its first year of operations.
2. Hulu may be bucking and reshaping the long held belief that video on the internet needs to be three minutes long.

The New York Times Bits blog leads a post about longer format video on the web with information on Hulu, but then discloses that The Wall Street Journal is experimenting with 4-7 minute videos and Blip.tv says its most popular videos are now of 5-7 minutes on average as compared to 3-5 minutes a year ago. Bits posits that the Internet will undo some of the “dumbing down of news caused by television.” As people have more choice, they’ll view higher quality video on the web regardless of length. While television is encumbered by its time slots, the web is not, as a result web video can be much better.

I believe web video will change dramatically in the coming years as technology changes. I recently moved in with my girlfriend and coerced her into canceling cable. I reasoned that all the television we wanted was available on the web. All we’d have to do it plug a laptop into the television and away we’d go.

Here is where the disconnect begins. Her computer is 6 years old and skips and struggles to play shows on Hulu. I just this week upgraded to a new laptop, my previous laptop was 3-4 years old. In addition to the laptop I purchased a lovely 22″ monitor so I can work from two screens.

How many people represent my girlfriend and how many represent me? My new hi-def monitor is about as large as our television, and video comes in smoothly. I don’t see the need for a television or cable. I can watch 30 minute to 2 hour long programs from the web with comfort. I suspect I am in the minority. I suspect most people are using old laptops or desktops which do not play video particularly well. In time this will change. At that point, I see a big switch in web video behavior.

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Portfolio’s Media Reporter Reports On Portfolio News From Jury Duty?

When I learned that Portfolio was scaling back its web operations, I wondered how Jeff Bercovici, Portfolio.com’s media reporter would report on Portfolio. Would he just recuse himself? Apparently not. He’s reporting from jury duty and he’s got considerably less information than his fellow media reporters:

Portfolio: Condé Nast Publications, which owns Portfolio, just announced that Men’s Vogue will cease to be a standalone publication, returning to its origins as a semi-annual supplement to Vogue. Editor in chief Jay Fielden will continue to edit it, according to Condé Nast CEO Chuck Townsend. The New York Observer’s Media Mob blog carried first news of the shutdown. I don’t have much to add, since I’m still serving on the jury of a trial that probably won’t wrap up until tomorrow.

There are also some changes right here at Portfolio: A spokeswoman says the frequency will be reduced to 10 times a year, from 12.

Portfolio Magazine Downsized At The Expense Of The Website

The recently launched business magazine Portfolio will now only be published 10 times a year, instead of 12. The December and January issues will be combined as will the June and July issues. Alley Insider reports that the web staff will be pared down to just 5 people. It currently has 20 employees. In addition to the cuts at Portfolio, Conde has rolled Men’s Vogue into Vogue, and will only publish Men’s Vogue twice a year.

The pain felt by newspapers is now hitting magazines hard. Conde Nast, the highly esteemed publisher of Portfolio, as well as Vanity Fair and The New Yorker has seen ad sales decline precipitously. 24/7 Wall Street reported earlier this week that “The New Yorker is down 24% through November. Vanity Fair is off 12% but its November issue lost 34% of its ad pages compared to the year before. Vogue dropped 7% but pages were down 32% for November compared to the same month in 2007.” They got their numbers from media newsletter MIN.

The numbers for all magazines are rather gruesome. In the business category, BusinessWeek has lost 17% of its ad pages, Forbes lost 16%, but Fortune managed to lift by 2%. Newsweek and U.S. News dropped 27% on average. And other titles like Cosmopolitan, Redbook and Good Housekeeping are also down.

The cuts at Portfolio are simultaneously expected and unexpected. From the start, Portfolio has been criticized. Launching a print product in the age of the internet was seen as foolish. Even executives at Conde Nast admitted the magazine would cost $150 million over the next few years before becoming profitable. Though the magazine was expected to lose money, many believed that Conde would allow the magazine to hemmorage cash for years, eventually delivering a terrific–and terrifically profitable–product, just like it did with Vanity Fair and The New Yorker. Apparently, this is not the case.

UPDATE: From MediaMemo:

Portfolio.com staffers have been told they have been meeting their revenue goals for 2008 while the magazine has not. According to a person who attended the meeting, one of the staff’s braver souls asked Carey why the Website was being punished more severely than the magazine.

“He gave a sort of corporatespeak answer, and what it appeared to boil down to is, is ‘This is a magazine company’,” says a person who attended the meeting.  “And it left the impression that the website was sacrificed to save the magazine.”

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Dumbing Down Smartphones

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I’ve got a new story called Dumbing Down Smartphones on the BER Business Times website:

When Google and T-Mobile unveiled the G1, the first mobile phone run by Google’s mobile operating system, Android, in mid-September, the companies touted the phone’s powerful features. The G1 would quickly and easily access the Internet, they said. Its myriad applications — from the barcode scanner, Androidscan, to Eco2go, which tracks your carbon footprint — would be cheap; the software open-source, so users could design all sorts of nifty programs for the phone without seeking permission from Google or T-Mobile.

In enumerating the phone’s many positive features, however, the companies failed to mention one important negative: a strict cap of one gigabit of bandwidth per month on the phone’s Internet access. That’s the equivalent of just 10 YouTube video downloads and 30 email messages. Go over the cap, and the download speed would slow to dial-up levels, making some of its best features essentially unavailable. When reporters and bloggers noticed this cap, they began to howl — technology blog Gizmodo called the plan “completely intolerable” — and T-Mobile quickly eliminated the one-gig cap, though the company isn’t saying what the cap will eventually be.

This incident foreshadows the coming trade-offs telecommunication companies face. T-Mobile had to limit data usage because it doesn’t have the infrastructure in place to handle hundreds of thousands of users accessing data at the same time. And expanding the infrastructure enough to handle the traffic could cost billions. Why? Because, it turns out mobile phones are not entirely wireless. When an email is sent from a mobile phone, the signal is beamed wirelessly to a nearby base station, which forwards it to central office via landlines. The signal is then sent, again wirelessly, on its way to the intended recipient. The wired connection between the base station and the office is called the backhaul, and it is the choke point in this system. It is unrealistic to believe that the networks can support the resulting spike in traffic, says Nadine Manjaro, who covers wireless infrastructure as a senior analyst at ABI research. As companies expand capacity, “we will see increases in backhaul costs,” she says. “And as you get more iPhone-like smartphone devices, you’ll get more problems. Slowing networks are definitely a concern, and dropped calls.”

Continue reading–>

Newspaper Circulation Slides (Again)

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It’s not just advertisers that are abandoning the print version of newspapers, it’s consumers too. Circulation dropped by almost two million for the 6 month period ending in September of 2008 as compared to the same in 2007.

WSJ: Average weekday circulation was 38,165,848 in the six-months ending in September, a 4.6% decline from 40,022,356 a year earlier at the 507 papers that reported circulation totals in both periods.

The drop was only 2.6% in the September 2007 period, compared with September 2006. In the six-month period that ended in March 2008, the decline was 3.6% over a year earlier, according to circulation figures that newspapers submitted to the Audit Bureau of Circulations.

Sunday circulation fell even more, 4.8%, to 43,631,646 in the latest period at the 571 papers with comparable totals. The drop was 3.5% a year ago and 4.6% in the period ending in March.

While I know a few people that still read newspapers, I find it hard to believe that this economic downturn won’t increase the speed with which people cease to purchase newspapers. Why pay for something that is essentially free? This decline will undoubtedly soar in the coming months. Perhaps in anticipation, the LA Times is cutting 75 employees or 10% of its editorial staff. (Just like the Star-Ledger.)

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It’s Not Just Scary, It’s Dire

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Over the summer I worked at BusinessWeek. There existed a constant gloom about the state of the industry amongst many of the writers and a few of the interns. I remained buoyant. I thought things would be fine, that they’re just changing. Now I’m not so sure.

The economy won’t recover any time soon and the election is almost over which means another source of ad dollars will dry up. Mr. David Carr reports:

By some estimates, Senator Obama will have spent $250 million on local, cable and network television in just five months, a rate of advertising that outstrips Burger King, Apple and Gap on an annualized basis. And it dwarfs the $188 million that President Bush spent in 2004.

In the midst of this scary environment, the Star-Ledger just announced a plan to cut 40% of its newsroom staff. Where will those people get jobs? I have one idea, but a lot of places are cutting staff, so that might not work. Gawker has another idea: Talking Points Memo is looking for two reporters. Suddenly all those reporters that dissed blogs, might have to start singing a different tune.

See Also:

Voodoo Newspaper Economics

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Former Reporters Talking About Their New Jobs And The Media Environment

This is a first cut of a video. It has a few problems, but I’m largely pleased with this cut, so I’m going to post it here. I’ll probably do a second cut to restructure the entire thing, tightening it. The critisisms I received were:

• Touches too many topics but doesn’t narrrow in on one.
• Too long
• We’d like to know more about these people
• I need to redo the voice over.
• More to come, I forget some of the problems.

How To Fix The New York Times

A full explanation at Silicon Alley Insider:

1.  Sell the stake in the building.
2.  Try to sell the Boston Globe and Red Sox stake.
3.  Eliminate the dividend.
4.  Shrink, sell, and/or shut down the regional papers, which are bleeding cash.
5.  Reduce the size of the New York Times newsroom by 30%.
6.  Significantly reduce the $1.1 billion of debt–and, possibly, pay it off completely.
7.  Use the breathing room to put a long-term print-to-online transition plan in place.

The New York Times Faces Grave Challenges

The Times reported preliminary results and those results are troubling. Over at Alley Insider, we said the New York Times is running on fumes, because it is burning cash faster than it’s earning it. As a result, the company will evaluate scraping its dividend to protect its debt.

Here’s my SAI take:

The New York Times unleashed a slew of bad news earlier: ad revenue continues to plummet, the print business is in permanent decline, and the company is running on fumes. As a result, the Board is going to evaluate the company’s dividend payout.

And well they should: the dividend costs the company $132 million of precious cash annually. However, that money is likely much of what is protecting the paper from being sold, as the increasingly extended (and fractured) Ochs-Sulzberger clan lives off the juicy dividend.  From a recent New York magazine article:

In order to keep the family—and shareholders—happier in these lean financial times, Sulzberger has quietly ramped up the amount of cash they receive in a quarterly cash dividend. This, more than the sale of stock, is the source of the Ochs-Sulzbergers’ working wealth. Sulzberger and CEO Janet Robinson raised the dividend by an extraordinary 31 percent last year—even as the stock price declined. Of the $132 million a year the paper gives to shareholders, about $25 million of it now goes directly into the coffers of the Ochs-Sulzberger trusts.

If the Times cuts its dividend, while at the same time admitting that the print business could be in a permanent decline, how many Ochs-Sulzbergers will sit around and watch their inheritance die?  Wouldn’t they instead begin agitating for a sale of the company? (Or at least become more open to one).

If the company cuts its dividend, it will shore up the balance sheet, but make it easier for someone like Rupert Murdoch or Sam Zell to swoop in with an offer to divide the family and the shareholders, forcing a sale.

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